First, individual taxpayers or taxpaying married couples must add up their “modified adjusted gross income.” This is their taxable income, plus their tax-exempt income, plus half of their Social Security benefits. If this figure exceeds certain income levels, a portion of Social Security benefits is taxed.
Next, a worksheet is completed to determine the amount of Social Security benefits that is taxable. This worksheet can be found in the annual instructions package for tax forms available online in the “Forms …